The 10-year Treasury yield on Wednesday surged the most in three years to trade above 2%, a level not seen since January, on expectations Donald Trump will significantly boost fiscal spending, adding to the country’s debt burden.

“Right now, it’s a fear trade,” said Kevin Giddis, head of fixed-income capital markets at Raymond James. “While it is very early and most are trying to understand the forward thinking, the general perception is that a Donald Trump presidency will take us further into debt and ultimately be inflationary, affecting the values of all debt, including Treasurys.”

As Treasury prices fell, the yield on the 10-year Treasury note
TMUBMUSD10Y, +0.00%
soared 20.3 basis points to 2.070%, its biggest single-day move since July 5, 2013, according to Dow Jones data. The yield on the 30-year bond
TMUBMUSD30Y, +0.00%
jumped 24.7 basis points to 2.877, its biggest rally since Aug. 11, 2011. At the short end of the curve, yields bounced back with the two-year
TMUBMUSD02Y, +0.00%
up 3.2 basis points to 0.894%.

Yields at the short end, which had earlier declined on haven-inspired buying and fading expectations that the Federal Reserve will raise interest rates in December, reversed direction. Bond yields and bond prices move in opposite direction.

The implications on the debt market of a Republican sweep across the Senate and the House are serious, according to David Harris, senior investment director of fixed income at Schroders.

“Six years of political gridlock are very likely over and we should ultimately expect higher fiscal stimulus, deregulation and tax reform, all of which suggest both larger Treasury issuance and increasing inflationary pressures and will lead to higher interest rates once we get through any near term uncertainty,” he said.

Still, Fed-funds futures, a popular way for Wall Street to bet on the odds of a rate increase by the Federal Reserve, held steady, with the market pricing in a 76.3% probability of a December rate increase, according to CME Group data.

“The Trump victory means the global deflation crisis may finally be resolved. It might be chaotic how it gets better, but deflation’s prognosis is much poorer, with Trump. And that is ultimately good,” said Richard Hastings, macro strategist at Seaport Global.

Government-bond prices initially rallied across the board, pushing yields lower, as the potential for a surprise Trump victory over Democratic challenger Hillary Clinton rose. Treasurys typically serve as a haven asset during times of uncertainty.

After an initial drop, U.S. stocks rebounded with the S&P 500 index
SPX, +0.59%
and the Dow Jones Industrial Average
DJIA, +0.72%
both up more than 1%. Stocks had been moving higher, suggesting that there was some appetite for risky assets, which can be bearish for government bond prices, lifting yields.

Rob Carnell, chief international economist at ING Bank, said aggressive protectionism espoused by Trump is likely to be the greatest threat to U.S. growth while expansionary fiscal policy could offset some of the adverse impact. However, the Fed is likely to view the market turmoil as a financial market tightening.

Bond investors react to Trump: buy Treasurys (haven!). No wait, sell them (fiscal spending!!). No wait, not that much pic.twitter.com/yOcba7ld2L

Analysts also said expectations that Trump will introduce large tax cuts and a significant increase in public spending, particularly on infrastructure, could lead to bigger deficits.

“If Donald Trump decides to pursue a course of fiscal stimulus as history suggests is likely from a GOP President, already tight labor markets will face more pressure. Inflation will likely rise,” said analysts at Bespoke Investment Group in a report. The analysts added that they are in favor of shorter-term debt rather than longer-dated Treasurys.

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